Vestas's CEO Engel Targets U.S Expansion, General Electric's Turbine Lead

Vestas Wind Systems A/S, the world’s largest maker of wind turbines, hasn’t won an order in the largest global market since 2008. Chief Executive Officer Ditlev Engel aims to change that this year, with an expansion that may topple General Electric Co.’s U.S. lead.

Denmark’s Vestas plans to spend $1 billion in the U.S. to expand annual production capacity in Colorado to 3,000 megawatts and hire 2,000 workers to sell and build turbines. General Electric supplied 2,633 megawatts to U.S. developers last year, or about 26 percent of the market, the company said Jan. 22.

“We want to be a champion so that basically means we want to beat everybody,” Engel, 45, said yesterday in an interview at Bloomberg headquarters in New York. General Electric “is a very skilled competitor. The fact that they put a lot of resources into the industry is good for all of us.”

U.S. developers installed wind turbines with a capacity of more than 10,000 megawatts last year, bringing the total to 35,000 megawatts in operation, the largest concentration in the world, according to the American Wind Energy Association. Concerns about the expiration of federal tax credits for wind energy prevented Vestas from investing in the U.S. sooner, Engel said.

Vestas reported its first quarterly loss in four years yesterday, while reiterating a forecast for sales this year of 7 billion euros ($9.24 billion). The company expects to sign contracts for 8,000 to 9,000 megawatts in 2010, 30 percent of which will come from the U.S. and Canada, half from Europe and the rest from Asia.

‘Aggressive’ Forecast

“That’s a pretty aggressive forecast in this environment,” said John Hardy, an analyst at Broadpoint AmTech in Greenwich, Connecticut, who has a “neutral” rating on the shares. “They must have a number of customers that are almost ready to announce.”

Vestas fell 16 kroner, or 4.6 percent, to 335 kroner in Copenhagen yesterday, the biggest drop since Feb. 23. That cut the gain this year to 5.7 percent and reduced the company’s market value to 68.2 billion kroner ($12.1 billion).

This week Vestas signed the biggest order in its history, with an agreement to deliver 2,100 megawatts to EDP Renovaveis SA for projects in North America, Europe and South America. The sale is worth as much as $2.9 billion, according to an estimate by Jacob Pedersen, an analyst with Aabenraa, Denmark-based Sydbank A/S.

“The Obama administration is very sincere about its commitment to renewable energy,” Engel said. “Now we see that the market is improving in the U.S., and we are ready to start filling the factories we’ve been building.”

Turbine Production

Vestas can produce turbines more cheaply in the markets where it plans to install the most because the large steel towers and fiberglass blades often require port upgrades and costly, customized freighters and equipment, Engel said. At the factory in the U.S., rail lines run adjacent to production lines, so that parts can be shipped less expensively than by truck, he said.

“We can produce cheaper in the U.S. than to build them in China and ship them overseas,” Engel said.

In China, Vestas plans to reserve all of its production capacity for a growing number of Chinese projects rather than exporting turbines to neighboring countries, Engel said. The company last month won an order for 198 megawatts of turbines in China.

Vestas will expand production internally and has no plans to buy other turbine manufacturers, Engel said. The company may consider acquiring new technologies for its turbines as they emerge, he said.

GE Expansion

GE, based in Fairfield, Connecticut, bought the wind turbine business from Enron Corp. in 2002 and has since invested about $1 billion to improve efficiency, Victor Abate, who runs the company’s renewable energy unit, said last month. The company is the world’s biggest maker of jet engines, power-plant turbines and medical-imaging equipment.

Global installations of wind turbines this year will gain about 9 percent, adding 41 gigawatts to power capacity, Bloomberg New Energy Finance has estimated. That’s the equivalent of an investment of $65 billion and enough to power more than 12 million homes, according to data from the U.S. Department of Energy and the American Wind Energy Association.

Vestas yesterday reaffirmed its 2015 targets for annual revenue of 15 billion euros and an Ebit margin of 15 percent in its so-called Triple15 plan.

The order book was worth 2.9 billion euros at the end of the quarter compared with 4.9 billion euros a year earlier.

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net.

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